On account of the cut, state-owned oil companies' losses on sale of diesel would increase to Rs 2.30 per litre from the present Rs 1.30 a litre. Oil companies, which were hitherto earning a profit of Rs two per litre on petrol, would be breaking even following the reduction.

In the national capital, retail selling price of petrol post-reduction would be Rs 42.85 a litre and diesel Rs 30.25 a litre.

The Finance Ministry is also likely to make duty adjustments, possibly cut excise rates, and an announcement in this regard is expected later on Thursday.

The two key motor fuel prices were last reduced by an identical amount in November.